Attached is Lynnfield’s Tax Levy Analysis over several years. Based on Proposition 2 1/2, a community cannot levy more than 2.5% of the total full and fair cash value of all taxable real and personal property in the community. (Please keep in mind, a 2 ½ % increase is the legal maximum tax increase allowed under Proposition 2 ½. It is not state law that a 2 1/2 % increase be appropriated annually.
Second, a community’s increase is also constrained in that it can only increase by a certain amount from year to year. (The attached document refers to this as a LEVY LIMIT.) The LEVY LIMIT will always be below, but cannot exceed the LEVY CEILING. In other words, the LEVY CEILING is the “High Water Mark” of legal taxation.
For a better understanding of our taxes and what our tax base has been, see Exhibit 1 where explanations of how our tax base is calculated are shown. These simple formulas are being provided to you, so you can better understand the taxation algorithms being applied to our 4,000 residential and 135 commercial tax payers.
*Please note, per the Weekly News article, dated December 5, 2013, written by Baynard Stern, “Despite Market Street, residents still carry largest burden due to sheer numbers”. As a homeowner of Lynnfield, you are the financial backbone of this community. Collectively, our front doors contribute the lion’s share of tax dollars to Lynnfield.
EXHIBIT 1 EXPLANATION (refer to attachment)
Exhibit 1 LYNNFIELD ANALYSIS FY04 THRU FY14
2 ½ % increase maximum legal increase based on Proposition 2 ½. (This is a calculation, not a mandatory increase.)
TAX TO MAX ALLOWABLE LEVY LIMIT NEXT FY = (LEVY LIMIT PREV FY) X (maximum 2 ½% INCREASE) + NEW GROWTH +OVERRIDE + DEBT EXCLUSION
NEW GROWTH = tax revenue received from new properties completed during the year (new growth is a one time “pop”, it gets added into the next year as regular tax base)
OVERRIDE = towns votes on this, it could be something like the school override, or any other override we vote on. An override stays in the tax base and never comes out.
LEVY LIMIT SUBTOTAL = LEVY LIMT PREVIOUS YEAR+ MAXIMUM 2 ½% TAX INCREASE (APPLIED FOR THE PAST 10 YEARS) +NEW GROWTH+OVERRIDE
DEBT EXCLUSION = MONEY USED TO PAY OFF TOWN DEBT, SUCH AS BONDS (WHEN SOMETHING IS PAID OFF, IT IS NO LONGER INCLUDED)
IMPORTANT THINGS TO REMEMBER:
New Growth is a onetime large upside for our town. Once it is recognized, it becomes part of the tax base that our town historically will get a 2.5% increase. Legally this new growth will not increase any more than 2.5%, once it has been recognized in a previous year.
An Override never goes away. Once an override is passed, it is part of our tax base forever unless offset by a properly voted Underride [the opposite of an Override].
LOOKING AT THE GREY BOX TO THE RIGHT IN EXHIBIT 1
TAX TO MAX ALLOWABLE LEVY LIMIT (If less than the LEVY CEILING, this is the maximum amount that can be raised through taxation of real and personal property. It cannot be exceeded absent a new override and then only up to LEVY CEILING) = LEVY LIMIT PREV FY + MAX 2 ½% INCREASE +NEW GROWTH +OVERRIDE +DEBT EXCLUSION
ACTUAL LEVY = That portion of our budget approved at Town Meeting based on the request of the Board of Selectmen to fund the town budget through real and personal property taxes. This number, when divided by the pro-rated values of home and commercial fair market values, determines tax rate for each of our two tax classifications expressed in dollars/thousand.
EXCESS LEVY = Difference between the legal limit the town can tax our real and personal property versus how much the town actually uses. As you can see, the trend has been we spend as much as we can legally tax.
OTHER SOURCES OF REVENUE = State funds, Excise tax payments, Meal tax payments, Cemetery and miscellaneous small account receipts. These total receipts, which can be used to reduce property taxes and/or applied to Town Operations, have typically been added to the voted Levy and directed to funding Town Operations and that summed number then becomes the total budget requested by the Selectmen.
Exhibit 1 LYNNFIELD ANALYSIS FY04 THRU FY14
EXHIBIT 2 EXPLANATION (refer to attachment)
EXHIBIT 2 Copy of FY 2015 BUDGET REDUCTION ANALYSIS
Compares projected revenues and 2015 budget with and without 2 ½% tax increase.
Chart comparing what our budget would look like over 10 year period applying 2 ½%, 1 ½% and 0% increases.